HR expertise needed for successful acquisitions

HR has to develop its skills on mergers and acquisitions if it is to have
the respect of the board when restructuring activities are in the offing

HR directors don’t have the commercial expertise or business knowledge to
support their companies effectively through merger or acquisition activity.

You might think a comment like this would have most HR directors frothing at
the mouth in anger – but the truth is that nearly half of FTSE 250 HR directors
interviewed in a recent survey admit to it.

And with a similar proportion of finance directors sharing the same opinion,
is it any wonder HR issues take a back seat during most corporate transactions,
thus contributing significantly to their failure to deliver against
expectations.

The survey by the Human Resource Consulting practice of
PricewaterhouseCoopers supports the previously-held belief that CEOs, finance
directors and transaction directors do not consult their HR colleagues early
enough in a merger or acquisition situation. HR directors showed refreshing
honesty, revealing that even if called in earlier to help smooth the way for
M&A activity, their own HR functions lack the necessary capabilities to be
effective.

In an ideal world, with the right skills and support, HR directors can make
an enormous contribution to the success of corporate transactions. However,
they cannot possibly earn the opportunity to prove this when they themselves
acknowledge their limitations. Company executives should know by now that
mismanaging or ignoring employee issues at times of major change will lead to a
significant downturn in business performance arising from a loss of key people,
depressed morale, poor customer service and low productivity.

Failure to tackle critical people issues, such as retaining top talent and communicating
effectively with the workforce, is a key reason why 70 per cent of all deals
fail to meet expectations. And while there is no doubt that today’s companies
are far more aware than they were a decade ago about the critical importance of
successfully addressing the people challenges in such transactions, it is
equally true that management, including HR, often neglect to tackle the
critical people challenges early enough.

Although the survey found 87 per cent of respondents (finance and HR directors)
recognise that effective employee communication is a critical component of any
successful deal, there are still consistent and common problems around key
issues that affect a vulnerable and uncertain workforce.

The most common problems include failure to communicate at the right time, a
lack of clarity around who is in charge and how these leaders should behave.
This of course results in a significant dip in business performance and in most
individuals in the workforce feeling vulnerable and uncertain.

HR directors and functions can and should play a strong role in helping
organisations achieve the goals of a corporate transaction. However, to be able
to do this they must demonstrate a better understanding than has been
traditionally the case of what really matters for business success – and how to
tackle the critical people issues that impact most. Only then can HR earn the
internal credibility to have that early leadership seat in their company’s
corporate transaction.

The first step in any positive move forward is to recognise when change is
required. The fact that so many HR directors in our survey recognise the
challenges they face, bodes well for their future opportunities to successfully
address these issues and step up to the mark.